Bank efficiency and access to credit: International evidence

Francis Osei-Tutu and Laurent Weill

Economic Systems, 2022, vol. 46, issue 3

Abstract: This paper examines the impact of bank efficiency on access to credit. We test the hypothesis that higher bank efficiency, meaning a better ability of banks to operate at lower costs, favors access to credit for firms. To this end, we perform a cross-country analysis with firm-level data on access to credit and bank-level data to compute bank efficiency, using a sample of about 54,000 firms from 76 countries. We find that greater bank efficiency improves access to credit for firms. The beneficial impact of bank efficiency to alleviate credit constraints takes place through the demand channel by reducing borrower discouragement to apply for a loan. Whereas the positive impact of bank efficiency on credit access is observed for firms of all sizes, the effect tends to be more pronounced in countries with a better economic and institutional framework. Our results therefore support policies favouring bank efficiency to enhance access to credit.

Keywords: Bank efficiency; Access to credit; Borrower discouragement (search for similar items in EconPapers)
JEL-codes: G21 O16 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Working Paper: Bank Efficiency and Access to Credit: International Evidence (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:46:y:2022:i:3:s0939362522000784

DOI: 10.1016/j.ecosys.2022.101016

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